Why venture capitalists see gold in energy management software

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We all know about the global energy dilemma—by 2050 energy demand will double and so we must cut CO2 emissions by half. People understand that by hitting this target it will positively impact—even save our environment. But, many company executives still don’t realize the positive effect it will have on their businesses. The truth of the matter is that energy plays a larger role in profitability than ever before, due to things such as:

• Increasingly complex sourcing options
• Highly volatile energy costs
• Escalated regulatory demands that include the reduction of CO2 emissions
• The increasing importance of a solid sustainability strategy to customers, shareholders, media, and employees
• Political and public pressure is mounting
• Reporting requirements are becoming more rigorous
• More demanded access to corporations’ energy data (internal & external)

Keeping all of this in mind, I find it ironic that many companies still don’t see energy management as a priority or as a controllable expense. For example, in the retail industry energy is the largest operating expense, yet many small- to medium-size retailers still don’t see it this way. They are under the impression that implementing efficient energy management measures is an investment that is too expensive because energy consumption is a cost they can’t control. This isn’t true and thus, they don’t realize the positive impact energy efficiency measures will actually have on their bottom line.  Here is an interesting article from Venturebeat with some eye-opening statistics. In the US, the nearly five million commercial and industrial facilities account for almost half of all domestic energy consumption—at a cost of more than $200 billion each year. Yet, only 5% of the market is adopting energy management tools to help them reduce their energy usage and spend. To me, this also means that implementing a solid sustainability strategy is most likely not a priority either, as sustainability strategy and energy management go hand-in-hand.

However, there is hope. This thought process is changing and people are slowly but surely beginning to see the benefits that effective energy management measures and a solid sustainability strategy can deliver, both for the environment and for the wallet. In this free executive summary from Pike Research, it is predicted that the energy management software and services industry will grow to $5.5 billion by the year 2020—that’s an annual compound growth rate of more than 20%. So, it’s no wonder that investing in this market has spiked interest with venture capitalist firms. It’s an easy investment, with little capital, and a fast ROI.

This kind of change, in as little as 7 years, is both fascinating and reassuring to me. It lets me worry less about the future for my children.